Avoiding Financial Mistakes In Divorce
Article by Nancy C.L. Stein, Esq., Staff Writer, PR4Lawyers
If you think that your spouse intends to divorce you, take steps to protect yourself. Make copies of all important financial documents including savings, stock and insurance account statements and any information relating to your married lifestyle including checking account, mortgage and home equity statements, charge card statements and your federal and state tax returns. If you fear your spouse may try to liquidate or change title to marital assets, provide written notification to the asset holder and seek a restraining order. Cash in joint checking and brokerage accounts and cash value of life insurance policies are also vulnerable. Protect assets in advance. Legal and forensic accounting costs to uncover and get back these assets can be prohibitively expensive.
Avoiding Contentious Litigation
Engaging in a winner-takes-all battle is a big mistake, leaving far less to live on post-divorce. Except in the most egregious cases, equitable distribution laws apply in divorce and courts wont punish a spouse financially for being a bad person.
If there are few valuable assets, both parties want to avoid a contentious divorce and are willing to workout joint custody and a fair settlement, mediation is a cost-effective alternative to litigation. You save thousands of dollars in legal fees, avoid emotional stress and benefit from the flexibility mediation affords.
Consulting Financial Professionals
Work together with a financial planner or accountant to minimize the total taxes you and your ex-spouse will pay during the separation and post-divorce. Such professionals can also help you create an accurate, complete budget, which will avoid the need to have a court reconsider maintenance later on.
Evaluating Settlement Proposals
When considering the fairness of a divorce settlement and whether it is workable, conduct a comprehensive and realistic analysis of your post-divorce lifestyle. Consider its future sufficiency and viability, remembering that inflation can hit hard.
Include assets, incomes, budgets, maintenance, child support, educational expenses, taxes, retirement goals, and investments in your analysis. Focus on the after-tax value of assets.
Avoid emotional attachments to assets. Concentrate on your true needs instead of on unrealistic desires. Failing to give a payor spouse sufficient money to live on will likely result in payment default. Be fair, but verify everything. Get payments up front whenever possible and secure them with assets and insurance.
Using the Right Professionals
Visitation and custody issues are best resolved working with a therapist. Accountants and financial planners are particularly skilled in addressing financial arrangements. Consult qualified professionals for emotional support and financial analysis instead of simply calling your attorney.
Updating Estate Documents Post-Divorce
Failing to change your life insurance policy, IRA and will beneficiaries post-divorce means that your ex-spouse will inherit a marital share.
Insuring the Divorce Settlement
Life and disability insurance can protect your divorce settlement payments and your family's security should your ex-spouse die prematurely or become disabled.
The Post-Divorce Financial Plan
Develop a post-divorce financial plan to help transition to a singles lifestyle. Recognize financial limitations, prioritize financial goals, and create realistic expectations and a plan for allocating financial resources.
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